Indian firm: Estonia defense contract dispute left us out of pocket - ERR

**Indian Firm Claims €70 Million Loss After Estonia‑India Defence Deal Fallout**

The Estonian Ministry of Defence’s €70 million ammunition contract with India‑based **Bharat Defence Systems Ltd.** (BDSL) has become the centre of a diplomatic and commercial dispute, leaving the company asserting that it is “out of pocket” after the deal collapsed. The agreement, financed in part by the European Union’s “Ukraine Support Fund,” was intended to supply 155 mm artillery shells to Ukraine through an Estonian conduit. According to BDSL, the firm fulfilled its production commitments and shipped the first batch of munitions in early 2024, but the Estonian authorities subsequently halted payments, citing procedural irregularities and alleged violations of EU procurement rules.

The controversy erupted in late July when Estonia’s Defence Minister **Kalle Laanet** announced his resignation, acknowledging “serious concerns” over the handling of the contract. Parliamentary investigations uncovered that the tender process had been rushed, bypassing standard competitive bidding requirements, and that portions of the funding were earmarked for EU‑approved projects only. While Estonian officials maintain that the suspension was necessary to protect public funds, BDSL’s spokesperson, Anjali Mehta, told *ERR* that the firm has already incurred **₹769 crore** (approximately €70 million) in manufacturing, logistics, and compliance costs, which it now seeks to recover through international arbitration.

The dispute has broader implications for EU‑India defence cooperation, as both sides navigate legal and diplomatic channels. The European Commission has expressed readiness to mediate, emphasizing the importance of maintaining the integrity of the Ukraine Support Fund while ensuring fair treatment of foreign contractors. Meanwhile, India’s Ministry of External Affairs has lodged a formal protest, urging Estonia to honour its contractual obligations and avoid setting a precedent that could deter future Indian participation in EU‑funded security projects. The outcome of the arbitration could shape the trajectory of Indo‑European defence collaborations for years to come.